Govt may file affidavit to help NTPC

Growth plans: NTPC’s Kawas project. The power utility claims it has a valid gas supply contract with RIL.

Updated: Thu, Aug 20 2009. 12 20 AM IST

New Delhi: The government may file an affidavit in the Supreme Court to protect the interest of state-owned NTPC Ltd, which is fighting a case in the Bombay high court against Reliance Industries Ltd (RIL) over the supply of gas.

Growth plans: NTPC’s Kawas project. The power utility claims it has a valid gas supply contract with RIL.

The move comes after NTPC’s decision to intervene in the ongoing legal battle in the Supreme Court between companies controlled by the estranged Ambani brothers over gas. The utility had also decided to present to Prime Minister Manmohan Singh, details of its own case against RIL in the Bombay high court.

Earlier in the ongoing saga involving a precious mineral commodity, two arch-rivals, two separate but related cases, and a state-owned utility, the government had intervened in the Supreme Court case between the Ambanis. It had also intervened in the same case when it was being fought in the Bombay high court. Both interventions have been seen by analysts as weakening NTPC’s case.

“The petroleum ministry may file an affidavit to defend NTPC’s interests,” said a minister in the United Progressive Alliance government, who did not want to be identified given the nature of the issue, which has snowballed into a controversy that has already sucked into it petroleum minister Murli Deora and the head of the Directorate General of Hydrocarbons, the government arm that oversees oil and gas fields, V.K. Sibal.

The minister’s statement was independently corroborated by an official in the petroleum ministry, who, too, did not want to be identified.

“We will find some way, whereby NTPC must not suffer. The problem is if we want to give NTPC a price of $2.34 (Rs113.96 today) per mBtu (million British thermal unit), the same price will have to be given to RNRL,” said this person. “The public sector should not suffer.”

RNRL, or Reliance Natural Resources Ltd, is the Anil Ambani-controlled firm that is fighting it out in the court with the Mukesh Ambani-controlled RIL over the validity of a family agreement between the two brothers for the supply of gas from RIL’s D6 block in the Krishna Godavari basin (KGD6) to a power plant being set up by Reliance Power Ltd, an RNRL associate.

The official’s position is contrary to one expressed by his minister Deora in Parliament on 6 August. While replying to a debate in the Rajya Sabha on the availability of gas to the power sector, Deora said: “It must also be noted that the contractor (RIL) has made no proposal on the price formula for determining the pricing of supply of gas to be made to NTPC, which is required under the PSC (production-sharing contract). This process not having been undertaken, e-GoM’s (empowered group of ministers) approved price is applicable.”

India auctions exploration blocks to companies (also called contractors). These contractors share production-sharing agreements with the government where they promise to give the latter some of the output of these blocks—if gas or oil be found in them—either in cash or in kind.

The price for gas from KGD6 was fixed on 12 September 2007 by an eGoM at $4.2 per mBtu.

Mint had reported on 8 August that NTPC had taken exception to Deora’s remarks and planned to lobby the government to protect its case.

NTPC, which is India’s largest power generation utility, comes under the purview of the power ministry and has asked its parent ministry to lobby the petroleum ministry to protect its interest. It wants the petroleum ministry to ensure that NTPC’s rights for 12 million standard cu. m a day (mscmd) of KGD6 gas at $2.34 per mBtu is protected and that the petition filed by the petroleum ministry in the Supreme Court does not jeopardize this. NTPC claims it has a valid agreement with RIL for this supply. RIL claims otherwise.

The government had, in a petition filed before the Supreme Court on 18 July, made a case for scrapping the gas supply agreement between RIL and RNRL. The terms of this agreement, including the price of $2.34 per mBtu, mirror those of the agreement NTPC claims it has with RIL.

The government has started work on a proposal to file an affidavit in the Supreme Court to protect NTPC’s interests after hectic parleys between the officials of the ministries of power and petroleum, and NTPC on Wednesday. The meeting was attended by power secretary H.S. Brahma, petroleum secretary R.S. Pandey, and NTPC chairman and managing director R.S. Sharma. These officials also met Deora.

“The plan of filing an affidavit is under discussion,” said a person who is part of the government’s legal team, but did not want to be identified. This person added that the form of the affidavit needs to be finalized and that this process could take at least two days.

Power minister Sushil Kumar Shinde, power secretary Brahma and NTPC’s Sharma did not respond to repeated phone calls. Messages left on their cellphones remained unanswered.

The government in its petition filed with the Supreme Court in the RIL-RNRL case said: “Knowing fully well that gas does not belong to them and that the contracting companies are bound by the PSC, the respondents (RIL and RNRL) have appropriated, through the MoU (memorandum of understanding), in a surreptitious and unauthorized manner, the entire gas, treating the same as their personal and family property.”

The MoU in reference is one between the Ambanis, signed at the time they split the Reliance group’s assets between themselves, and which outlines the supply of 28 mscmd of gas from RIL’s KGD6 block to Reliance Power’s Dadri power plant. NTPC has reason to be concerned by the government’s petition because its 12 mscmd supply is also mentioned in the same MoU.

The lawsuit between NTPC and RIL in the Bombay high court dates back to December 2005, with the point of contention being the existence and terms of a valid contract between the two. NTPC claims there is one in which RIL promised to supply 12 mscmd of gas for the expansion of the state-owned power generator’s Kawas and Gandhar power plants, both in Gujarat, for 17 years at a price of $2.34 per mBtu. RIL claims there is no contract.

While a spokesperson for the Reliance-Anil Dhirubhai Ambani Group, of which RNRL is a part, declined comment, an external spokesperson for RIL had not responded to Mint’s queries at the time this paper went to press.

On Wednesday, news agency PTI reported, citing unnamed sources, that NTPC may even claim damages from RIL for not keeping its commitment and that the difference between the government approved price of $4.2 per mBtu and the one committed in the tender would have to be made good by RIL.